Author: Siyanda Gaetsew. The Taxation Laws Amendment Act, 2018 (TLAA), which was promulgated on 17 January 2018, amended South African tax legislation by overhauling two provisions relating to the reduction of debt, (the Debt Benefit Rules), namely section 19 of the Income Tax Act, 1962 (the ITA) and paragraph 12A of the Eighth Schedule to the ITA (the Eighth Schedule). This article will examine the notable areas where the legislation per the TLAA differs and the importance of the timing of the application of such amendments.
Category: Income Tax
SARS prescription only starts once tax return has been submitted
Author: Eric Madumo, a Candidate Attorney and Joon Chong, a Partner at Webber Wentzel. In the recent case of CSARS v Char Trade, the Supreme Court of Appeal (SCA) that prescription begins to run against CSARS when a return for secondary tax on companies (STC) is submitted to SARS by a taxpayer. In the Char Trade case, a return for STC had not been submitted by the taxpayer. Due to this, prescription had not begun to run against CSARS. The result of this is that CSARS was able to make an assessment in 2012 of the taxpayer’s liability amounting to ZAR 1,812,609 for the 2007 cycle.
Tax non-compliance status may be inaccurate
Authors: Joon Chong, a Tax Partner, Nina Keyser, a Tax Partner, Nirvasha Singh, a Tax Partner & Carryn Alexander, an Associate at Webber Wentzel. SARS replaced the Tax Clearance Certificate (TCC) system with the enhanced Tax Compliance Status (TCS) system on eFiling in April 2016. The new TCS system is aimed at improving tax compliance as taxpayers can better manage their TCS and remedy any non-compliance through the “My Compliance Profile” (MCP) function on eFiling.
The capital v revenue question in the context of government grants: The SCA decides in favour of the motor manufacturing industry
Author: Louis Botha and Louise Kotze. In the recent case of Volkswagen South Africa (Pty) Ltd v Commissioner for South African Revenue Service 80 SATC 179, the age-old question of whether a receipt is capital or revenue in nature was addressed by the Supreme Court of Appeal (SCA), in the context of government grants paid to motor vehicle manufacturers.
Is it time to lower South Africas income tax rates?
Author: David Warneke, Head of Income Tax Technical, BDO South Africa. A fundamental question posed by commentators around the 2018 National Budget was whether an increase in personal or corporate income tax rates, or both, would be announced. The consensus, which proved to be correct, was that such increases were unlikely. The main reasons given were that personal and corporate income tax rates are already high by international standards. Personal income tax rates, mainly due to the introduction of the 45% maximum marginal rate in the 2017/2018 income tax year of assessment for taxable income above R1.5 million, and also since relatively high marginal rates are reached at low taxable income levels, by global standards. Corporate income tax rates, as the rates in most of our main trading partners are lower than ours and globally rates are decreasing.
Revised debt reduction rules
The debt reduction provisions contained in section 19 of the Income Tax Act, 1962 (the Act) and paragraph 12A of the Eighth Schedule to the Act have been amended with effect from 1 January 2018 and are applicable to years of assessment commencing on or after that date. As a result of the changes, the ambit of these provisions has widened significantly, as discussed below, and the additional circumstances to the rules find application are worth noting.
Notification of commencement of audit
By Yashika Govind, Senior Associate and Nirvasha Singh, Partner at Webber Wentzel. The obligation of SARS to collect tax and taxpayers’ rights are often at odds with each other. In an attempt to address this issue, the Budget 2018 (Budget) proposes to reconcile the taxpayers’ constitutional rights with SARS’ constitutional obligations by including a provision in the Tax Administration Act 28 of 2011 (TAA) stipulating that SARS must inform the taxpayer at commencement of the audit when the information submitted in a tax return will be audited. The provision is intended to cover desk audits which involve inspection or enquiries, without necessarily meeting with the taxpayer or third parties in person.
Procedure is everything: A win for the taxpayer and the importance of the right to just administrative action
Author: Louis Botha (Associate at Cliffe Dekker Hofmeyr). In recent times, taxpayers have often been unsuccessful in their disputes with the South African Revenue Service (SARS), especially where the dispute involved the interpretation or application of the substantive provisions of tax legislation. However, where disputes have involved compliance with the procedural requirements of tax legislation, taxpayers have generally had greater success. The judgment in Mr A v The Commissioner for the South African Revenue Service (Case No. IT13726) (as yet unreported), falls into the second category and is the subject of this article.
Demand loans, prescription and tax
Ben Strauss (Tax Director at Cliffe Dekker Hofmeyr). In South Africa, generally, debts prescribe within three years from the date on which they become due. If a person advances money or credit to another person without a fixed date for repayment, unless the parties agree otherwise, the debt becomes due on the date of the conclusion of the agreement. However, what is the position in the case of a so-called demand loan, that is, a loan agreement in terms of which the creditor has the power by making demand to unilaterally determine when the debtor must perform? That question was at issue in the Constitutional Court case of Trinity Asset Management (Pty) Ltd v Grindstone Investments 132 (Pty) Ltd 2018 (1) SA 94 (CC).
Ignorance is not bliss: A recent judgment about understatement penalties and a caution to taxpayers
Author: Louis Botha and Louise Kotze (Cliffe Dekker Hofmeyr)In the recent matter of Mr A & XYZ CC v The Commissioner for the South African Revenue Service (Case Nos IT13725 & VAT1426, IT13727 & VAT1096), which involved four combined cases, the South African Revenue Service (SARS) issued assessments to Mr A and XYZ CC (Taxpayers) relating to income tax for the 2007 to 2012 years of assessment and Value-Added Tax (VAT) for the 2006 to 2013 periods.